The Great Iraqi Oil Selloff
Gary Jones, General Manager of British Petroleum (BP) in Iraq, right, talks to Salah Abdulkarim, an employee of the Iraqi South State Oil Company, left, at the Rumaila oil field in Basra, Iraq, Tuesday, March 2, 2010. Backed by armed bodyguards, international oil executives have flocked to this southern Iraqi city to survey their potentially lucrative prizes: the fields that they hope will one day be pumping out dramatically greater amounts of cheap, plentiful crude. (AP Photo/Nabil al-Jurani)
Iraq Opens Up to Foreign Oil Majors (Bloomberg):
BP Plc and Exxon Mobil Corp. took the best deal they could get in Iraq last year when they won the largest oil contracts since addam Hussein was toppled in 2003. Oil companies may wait a long time to get a better one.
Parliamentary elections may produce a weak or unstable government incapable of tendering new oil contracts, said Samuel Ciszuk, a London-based analyst at IHS Global Insight. He said he does expect the 10 technical-services contracts won by Exxon, BP and 20 other companies to be honored.
“One thing that’s fairly certain is there won’t be a strong coalition, so it may take time for the next government to get its act together,” Ciszuk said in a telephone interview.
“Bottlenecks could hold up production increases” if no government forms by June.
Western producers haven’t had access to oil fields in southern Iraq since 1972, when the country nationalized production including concessions owned by the companies now known as BP, Royal Dutch Shell Plc and Exxon.
The contracts awarded in two auctions, which pay a per-barrel fee for development work rather than granting a share in the production itself, will cost the companies a total of about $100 billion to develop deposits, Oil Minister Hussain al-Shahristani said in December. Iraq, with the world’s third-largest oil reserves, will earn about $200 billion a year.
Iraq’s oil deals dominate PM election campaign (AP):
Backed by armed bodyguards, international oil executives have flocked to this southern Iraqi city to survey their potentially lucrative prizes: the fields that they hope will one day be pumping out dramatically greater amounts of cheap, plentiful crude.
For their companies, the fields that they won the rights to develop in two biddings rounds last year are their first foray into Iraq’s oil sector in over three decades.
For Iraqi Prime Minister Nouri al-Maliki, the executives and their investments are a vital part of his bid to win a second term in March 7 elections. Al-Maliki has billed himself to voters as the leader that can ensure the development of Iraq’s dilapidated oil sector and bring in billions of dollars to rebuild the country’s struggling economy.
Al-Maliki’s promises could take years to fulfill and many experts see his predictions for increasing oil output as wildly optimistic. But what matters for the premier is persuading voters to keep him in his post to shepherd the process.
“Al-Maliki can present himself as a guarantor to these plans … whether they are going to meet their huge targets or not,” Mideast oil analyst Samuel Ciszuk of the London-based IHS Global Insight said.
Iraq sits atop 115 billion barrels of crude, the world’s third largest proven reserves of conventional crude oil. But current production of about 2.4 million barrels per day remains well below levels before the 2003 U.S.-led invasion that toppled Saddam Hussein.
Iraqi Candidates Challenge Oil Deals (Wall Street Journal):
Iraq’s parliamentary elections could result in new legal challenges to government oil deals with foreign oil investors, hindering long-stalled efforts to develop the country’s prized fields.
In recent months, Iraq’s oil ministry has auctioned and approved large-scale development contracts with companies from China, the U.K., U.S. and elsewhere. Prime Minister Nouri al-Maliki’s oil minister crafted those deals after a petroleum law stalled in parliament— saying the government didn’t need parliamentary approval, and causing some lawmakers to cry foul.
If Mr. Maliki’s slate of candidates performs well, the prime minister would be in position to lead Iraq’s next government and the deals would likely be preserved.
Other candidates, including Ayad Allawi, who has emerged as a top challenger to Mr. Maliki, have raised the contracts as an election issue and called for them to be scrapped or reviewed.
“We aim to review all signed contracts in accordance with valid laws,” Mr. Allawi, the leader of a popular, cross-sectarian bloc, said in a statement Friday.
The deals are still relatively new, with very little field work completed so far. Any effort to reopen the oil contracts by a new government would likely slow or halt investment, say company officials and analysts.
Work “is not going to move forward with any urgency whatsoever if the government wants to renegotiate,” says Jason Gammel, an energy analyst with Macquarie Research.
Mr. Maliki’s government hailed the deals as crucial to boosting oil exports, which generate most of the country’s revenue. Big oil companies viewed the deals as footholds into some of the world’s largest fields, long closed to foreign investment and under-explored.
Iraq oil sales up but plans ‘unrealistic’ (UPI):
Iraq’s oil exports last month were listed as the highest since Saddam Hussein invaded Kuwait in August 1990. That may enhance Prime Minister Nouri al-Maliki’s election prospects but industry analysts say his plans to quadruple oil production in the next few years is way beyond Iraq’s capabilities.
“Oil exports for February reached 2.069 million barrels (per day) and this is the highest level since 1990,” Oil Ministry spokesman Assem Jihad said Tuesday.
“This is a step toward the ministry’s goal of exporting 2.15 million barrels per day this year.”
In some quarters, the ministry’s claim was taken with a pinch of salt amid suspicions it was a last-minute ploy to boost the chances of Maliki’s Iraq National Alliance in parliamentary elections scheduled for Sunday.
The ministry has in recent months signed 20-year contracts with foreign oil companies to take over 10 of the country’s major oil fields with the task of boosting production as soon as possible.
Maliki’s government has said it aims to push production, currently averaging 2.4 million bpd, to 10 million-12 million bpd in the next seven years.
Cnooc Near Deal to Develop Iraq Oil (Wall Street Journal):
A consortium led by Cnooc Ltd., the Hong Kong-listed unit of China National Offshore Oil Corp., is the front-runner to win the right to develop Iraq’s 2.5 billion-barrel Missan oil-field complex after agreeing to Iraqi government proposals, officials said Thursday.
The Iraqi Oil Ministry has concluded talks with Cnooc and its partner, Sinochem International Corp., relating to the development of the three Missan fields in southern Iraq and has submitted a draft contract to the cabinet for final approval, said one official familiar with the talks.
Cnooc officials couldn’t be reached for comment.
An agreement would further cement China’s strong role in developing Iraq’s oil fields. Cnooc’s rival, China National Petroleum Corp., has been the dominant player there, finalizing an agreement in November as part of a consortium including BP PLC to develop southern Iraq’s giant Rumaila oil field and clinching a $3 billion deal in 2008 for the Ahdeb field in Wasit province in southeastern Iraq.
China’s state-owned oil companies have been heavily investing overseas in recent years, albeit with mixed success, in an effort to ensure adequate supplies of fuel for the country’s booming economy.
If the Cnooc-led group wins the right to develop the fields, they would have to pay a recoverable signature bonus of $300 million, according to the Iraq oil ministry’s tender protocol.
The Cnooc-Sinochem alliance made an unsuccessful bid for the complex in the country’s first licensing auction in June. The two Chinese state-run companies initially offered to receive a remuneration fee of $21.40 for each extra barrel of oil produced and suggested raising production from the Fakka, Buzurgan and Abu Ghirab fields to 450,000 barrels a day.
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